Credit card debt increasingly affecting seniors

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Most of us have a rosy view of the elderly. We imagine that they live out their golden years in comfort--fit, distinguished-looking couples of the type that populate advertisements for retirement planning services. So an August 2010 paper entitled "The Rise in Elder Bankruptcy Filings and Failure of U.S. Bankruptcy Law" makes uncomfortable reading.

Its author, John A. E. Pottow, who is a professor of law at the University of Michigan Law School, reported that the number of elder Americans filing for bankruptcy increased dramatically between 1991 and 2007. To be fair, they were still underrepresented, with those aged 65 or older accounting for seven percent of bankruptcies but 12.4 percent of the general population.

But in 1991, only 2.1 percent of those filing for bankruptcy were in that age group, so that seven percent represents a rise of 233 percent. That increase is even greater among those aged 75 or older. They comprised 0.3 percent of all filers back in 1991, but two percent in 2007, a rise of 566.7 percent.

Credit card debt the biggest cause

When asked why they were filing for bankruptcy, fully two-thirds of those 65 and over cited credit cards as a cause. More specifically, they mentioned high credit card rates and fees. Surprisingly, that's a higher proportion than younger filers; only 53.3 percent of those mentioned cards as a cause. More predictably, "medical reasons" were cited by seniors as the second most frequent reason for their filing.

Using data derived from a National Consumer Law Center study, Professor Pottow suggests four possible reasons why seniors end up in bankruptcy:

A lack of competence or sophistication on the part of some seniors--some believe financial acuity peaks during middle age and then declines.

Cunning--some may be funding profligacy on credit cards, knowing that they can escape many consequences of such unsecured debt through the bankruptcy process.

Pride/covering up financial problems--running up credit card debt can provide a way of building a front that falsely suggests continued prosperity.

Social and financial isolation--when asked whether they could, if necessary, ask friends or family for help only 57.7 percent of elders said that that was a possibility, significantly fewer than younger groups.

Credit card rates a growing problem

It's sobering to recall that the professor's paper covers a period ending in 2007. Imagine how much worse the data are likely to be now, following a credit crunch and recession. Worse, if high credit card rates were cited as a major cause of difficulties before, they surely must be having a much more serious impact now, having risen substantially over the last three years. According to this site, at the time of writing the average credit card rate is 16.79 percent.

Credit score still good? Act now

Whatever your age, if you feel that your credit card debt is slipping out of control you should act as quickly as possible. Assuming that your credit score's still healthy, one sensible move is to check out some balance transfer credit cards. These often offer an introductory zero percent APR for balance transfers for six, twelve, and even eighteen months and that break from paying interest can provide a real boost to your finances--though only if you stop taking on more debt.

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